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Panic Next Week?
In spite of the headlines that the "Market Steadies" and "Stocks End Mixed after Raucous Week" my money is still on the downside going into next week. As I explained yesterday, the reason is the other shoe has yet to drop - when someone besides me (and a few executives in the banking world) gets wind of all the other places besides hedge funds where the 'toxic waste' that masquerades as investment grade paper has landed, it won't be pretty. You're not yet hearing about the write-downs in financial positions that will come as pension funds and college endowments are forced to "fess up" to their vastly overstated holdings..
Of course, they won't be alone. The SEC is launching an inquiry into the mess, but what they're likely to find is just what I described on the Steve Quayle radio show last night: A game of "hot potato" with plenty of blame for everyone:
This questionable paper was then sold to investors all over the world. And you wonder why Hank Paulson has been going to China on bended knee begging them to buy our paper? The reason is that if the world's investment community doesn't buy our paper, then the party is over for US financial markets and we will pick up with a Dow of 7,500 which is where we were in late 2002-early 2003 when house flipping and refinancings because the "New Bubble" helped by then Fed Chair Alan Greenspan pimping 'the highest rates of home ownership in history" - a mantra parroted by the Bush administration with no thought as to whether it would be sustainable. Well, guess what? It's not.
So, does the People's Economist believe the crawlers on TB reassure that the Bernanke crew has things "contained"? You had a drug test lately?
Sorry to say, this is late-stage capitalism eating its own offspring. The under-funded pension funds who were looking for the easy way out of their obligations are part and parcel of how the 300 richest families in America plus maybe the top 100,000 wealthiest players in this crooked game of financial fraud are systematically stealing the life savings of a whole generation by using greed, pure and simple, ramped up to unbelievable heights.
About two years back I told a then-colleague that I didn't think refinancing his home to put into a new business venture would be a good idea. "You mark my words," I told this fellow, "This will all end very badly and you'll wake up one morning to a phone call from a bank wanting you to pay down your loan so that the bank isn't 'upside down' on your note. "Oh, that won't happen," he assured me. Wanna bet?
The reason that a "conventional" real estate loan with a 20% minimum down payment got to be called "conventional" was because time and experience had shown that people won't walk away from a home where they have a lot of "skin in the game" in the form of personal equity. But now, as the housing crisis deepens, few in the mainstream financial media are laying it all out as clearly as they should because the news isn't just bitter -- It has the potential to herald the onset of Depression II in America.
With that will likely come social pressures like you've never seen, along with retribalization as affinity groups get together and reconnect to work on common goals. The Illuminati and their Wall Street proxies have no idea how wrong they've judged things. Yet.
My new personal strategic plan to ensure success and survival in the turbulent times ahead boils down to equal amounts of ammunition, ounces of silver, cash on hand, and pounds of stored foods plus consumables like toilet paper and paper towels. 5,000 of each would be a dandy position to aim for. But, there's no point worrying about it. Panic won't be showing up in newspaper headlines for a few days.
When up to a third of a trillion dollars being dumped into financial market's in 36-hours doesn't stem the tide, even the financially ignorant can sense something has changed. That's pouring money into the financial system at a rate equivalent to all of Canada's Annual GDP every four days. And what did we get? A 31-point Dow loss anyway!
Bread and Circuses! HDTV and Debates! It's always the same distractions at the end of empire.
Lots of employers are whining about new rules that will hold employers liable for hiring undocumented workers. Well, is is a felony to be in the USA illegally. Or, am I the only one who remembers that?
Now we read how Denmark is running to map out their piece of the polar region. You'll remember about a week back, Russia started exploratory diving at the North Pole looking for oil or anything else in the way of resources.
This is really an important story because we're likely to see a lot more of this kind of thing in the coming yet if the predictive linguistics boyz are right. The short term story is headlined "Flood victims class with police in India - 30 hurt". But the real story is what happens to people when Terra intrudes, as it has with the flood victims in Asia - and government doesn't effectively provide for its people.
Wheat Forecast Lowered
Meantime, the predictions in the linguistics that there would be food problems/shortage ahead here in the USA move another step closer with Winter Wheat production estimates being lowered. And no, I wasn't kidding when I said on Steve Quayle's show last night that Oklahoma farmers were scrambling to find seed wheat because of low head weights on their crops this year.
Gas Station Closures
Say, any chance that Big Oil knows what's coming for the economy? This email from Ireland this morning has me wondering:
Yeah, damn interesting question... Comments? Don't forget, the US is on the verge of energy panic now because of shrinking output from teh Mexican giant Cantarell field. Can you say "Restrictions on travel"?
Draft Trial Ballooned
Of course, with all our loyal youngest and brightest off in Iraq and Afghanistan, the Bush administration may run out of manpower. Especially if civil disorder comes a calling in our homeland. So what to do? Trial balloon the return of the draft. Don't rethink the assumptions, just keep going down the wrong road father...
Peoplenomics: Collapse Kit, Anyone?
It's been called the 'derivatives bomb" and everyone is hoping that it won't be going off any time soon. But, with the collapsing in the mortgage obligations market, one can never be too certain of what's ahead. The choices are basically shelter or ride things out in place, or go before the crowd. This week, a short excursion through the media hype to rethink our philosophy of being "ready for anything" with some updated options for bugging out.
"No Incumbents in 2008" Bumper Sticker
To get your "No Incumbents in 2008" click here. They're just $5. And no, that would not keep Ron Paul from running for the White House - he is not an incumbent there - having never held that job before, got it?
Reality is contagious - at least I hope so - so please tell all your friends that you read UrbanSurvival or Independence Journal, or even our Peoplenomics newsletter. That way, more people will become aware of what's going on in the economy, and with more smarts, maybe we can wake up America. Click here to shake them from their sleep.
Lower Your Cost of Living
Order our handy ebook "How to Live on $10,000 a year or less - and learn to live like a Third World person now. It's coming anyway, with big job layoffs this summer - and by ordering now, you can beat the rush...You may have more time to read this fall if the economy falls apart as I expect...
Friday August 10, 2007
Update: Fed Gives Panic Money
If you read this morning's report, I explained that the reason I have my gold call position is that it's like setting a trap line for the herd. Quite predictably, the Fed this morning announced that they were opening the discount window - a move which I'd label and analogous to printing free money for the bankers to keep up appearances that "it's all good"...
As the web bots are presently warning in the data: "Don't Panic". Seems the Fed isn't paying attention to the advice. And, of course, as they do this, the price of gold pops up... Yup, right according to plan.
Source: Pension Funds, College Endowments Next?
Let me start out this morning's review of the markets - which appear on the cusp of entering the second big leg down of Depression II because of the evolving question over valuations of collateralized debt obligations of all sorts - with reports from two sources which are pretty credible reporting that college endowment funds and pension fund exposure to the subprime market will likely surface next. This is extremely important in the context of our long-held belief that if the government says "Don't worry" - what a sane investor would do is worry like hell and stock up on Tums. And that's pretty much what happened yesterday when a rather weary looking George Bush tried to assure the global markets that 'it's all good.' Well, it's not.
First, the email from a well-placed confidential industry source who offers this (I've added emphasis to some key points):
OK, here's the opinion part: We know from the predictive linguistics of www.halfpasthuman.com that what we have seen in the markets this week is not even the start of it. I don't usually front-run the web bot reports, but the last of the ALTA 308 run may be posted late today or Saturday, but Cliff was kind enough to let me share part of an email this week.
In a telephone conversation, Cliff lets on that we might see some 'leading edge' of whatever arrives next Monday-Tuesday appearing in the headlines/media this weekend, so my bet is that someone besides me is going to figure out that yes, some college endowments and under funded pension funds have some unreported exposures and when people begin to get sense of how really big this mess is, the concern being expressed by the markets this week will be heading for panic in coming weeks. But, don't say we didn't warn you - and in more detail than most about the sequencing of things.
A side note: The next web bot run - which I've explained to people is sort of like a time machine/time viewer that uses language shifts on the internet to predict future developments based on some highly evolved concepts that Cliff worked out in his days as a SQL guru - will be getting underway next week. So that means the next actual data run should have its first posting (likely ALTA 0508 (meaning the data focus will be out to May 2008) will likely be two weeks from now for Part Zero - which will be the review of ending model space for 0308 and the ground/foundation layering for 0508 and then Pat One of the next series a week after that. Subscription information is available on the project site, www.halfpasthuman.com but first time participation is $200 for a series of six or seven reports over a 6-8 week period. We specifically don't want people subscribing who have incomes less than $100,000/year and substantial assets to protect and Cliff has been kind enough to let me post pertinent highlights of 'things coming" that will impact normal/regular/not rich humans - such as all our talk about the flood meme, secrets revealed, and now "Don't Panic - more's to come" about the markets.
This weekend, subscribers to my www.peoplenomics.com reports ($40/year) will get more pointers on how to weather this financial storm which appears to be still in its early stages. You might recall a few weeks back I started a little subscriber project called IMP - the Instant Millionaire Program - where the idea was to run a small amount of money (a thousand bucks in a commodity account and about the same in a stock account) and see how even these 'terrible times in the markets' could be profitable if a person was willing to take high risks.
I also reported to you that I had bailed out of WAGHI (Walgreen 45 calls for August) as a small $100 loss ($10 each contract on 10 contracts) so that I could roll into a short position on the S&P on Wednesday. Not that exiting WAGHI was a good decision, though: you'll see that the option traded as high as $270 yesterday (in options, you multiply the quote price times 100 because the quote is per share and the option represents 100 shares, so a $2.70 option costs $270, get it?). But, I'm all about risk - and while my 10 WAGHI options would have been worth up to $2,700 intraday Thursday (on an initial $900 speculation for 10 contracts at $90 each contract), I wanted something with a broader base than a single stock, hence my move into the S&P put.
That said, I can't really complain too loudly about how the strategy has played out since I entered the S&P put on Wednesday. My one-day return looks like this:
In other words, my speculation of $920 was up to $2,140.00 in market value as we go into this morning's session - and if we have another down day for the markets - which I'm expecting - then the value of this option should pop up another few hundred dollars.
Again, Peoplenomics subscribers will get to look at the chart, but this decline so far seems to be tracking the course of 1929 and 1987, so no reason not to expect a close today in the Dow 12,900-13,100 range. But, if the linguistics are right, next week will get even more brutal, so having peeked into the 'time machine' I won't be pulling out trying to snag profits until probably late next week, unless I hit one of my technical triggers.
Why share all this? I suppose it's a challenge to other economists/economics/business writers to show us your trades. I'm probably one of the few nut jobs who's publicly posting actual trade information from my personal account through this period.
IF the predictive linguistics are anywhere near right, the really pessimistic outlook would be that we have a 1987 or 1929 type decline into mid September, and if that became the case, the upside potential of this single option might be in excessive of $20,000. Or even $30,000. But, don't try to parallel trade me! This position will probably lose money! I only play options because I'm too lazy to go over to Boozier City, LA, or Las Vegas, NV.
THIS IS NOT ADVICE TO BUY OR SELL A PARTICULAR SECURITY. READ THIS SITE'S DISCLAIMER AND SEEK PROFESSIONAL ADVICE BEFORE YOU INVEST. INVESTING IN BOTH THE STOCK AND COMMODITY OPTIONS I PLAY DOES INVOLVE SUBSTANTIAL RISK AND THIS APPROACH IS ALWAYS AT RISK OF LOSING ALL, OR PART, OF THE INITIAL INVESTMENT.
I don't mind showing you that there are ways to make money, even if the gates of hell are opening in the financial world, though.
Someone asked me about gold - and why I have October $750 calls on the commodity side. Answer: I'm patient. First I'm betting on a stock decline, then panic, then flight to quality. Sort of like a trap line for a stampeding herd.
I'll be on Steve Quayle's radio show tonight talking about the market action this week and what might be ahead. If the market drops 12,900-13,100 weekly close range today, we'll be on a very dangerous parallel track to previous major declines. And my projected bottom - if the track continues - would be about where the web bots have been saying - September 18-19 kind of range.
Hell's Other Gate
To look ahead, and see the potential for another massive decline next week doesn't set us up with much for September. The question which comes up next is "Once it's generally realized that some college endowments and pension funds may have some exposure to the 'rotten loan bundles' and [panic] may visit, what is going to drive down shares in September so much? Maybe there's a hint of the dynamic in this email received from another reader:
This is precisely the kind of behind-the-scenes development I would expect as a presently invisible 'employment crash' starts working its way to the surface. I expect the unemployment rates will be soaring - which is why I send a hundred bucks to the local food bank when I can. (You?)
Mexican Outflows Slowing
A report from the AP's Susan Gamboa is headlined in Forbes today as "Fewer Mexicans are sending money home". I suspect it's an edge of the pending employment collapse and the prequel home construction decline linguistics. Bet me?
And need I remind you that mortgage applications are probably up because so many people are being turned down that they are making multiple applications hoping something comes through?
Sheehan Vs. Pelosi?
Cindy may take on Nancy Pelosi. Despite all the anti-war talk, we seem to be seeing little results by the democorps...
Why is this of note? Linguistically we are expecting a new non-partisan strong but low key female personality to arrive on stage shortly - no Sheehan is likely not 'it" - we're scanning for this new personality though.
More than one reader has been looking at bridge collapses around the country:
I don't bet...er...I speculate in options only LOL.
Pearl Jam Right On
Thursday August 9, 12007
Jamming Up the Buck
"Hello, earthling. I write to you this morning from a somewhat detached point of view; I find it helpful to image myself an alien sneaking the odd glance at earth from a secret trading base on the dark side of the moon. From this somewhat far-out perspective there seems to be a bizarre "valuation oscillation" going on that is just below the perception threshold of most investors. It seems to be largely based on the day's present valuation of the dollar and the results might be generalized like so:
While the oscillator is noisy, it nevertheless seems to offer some important clues as to the underlying psychology of the major players. The most interesting of which is either the recent drop in oil prices (which I expect will be down a bit today on dollar strength but it will be reported as inventory changes) and stocks which are also likely to be down a bit because of the strong dollar.
The great tug-of-war that's going on seems (at the pre-conscious level) to be "How shall we value the stock market?" One way to value the market - and admittedly the old fashioned way would be to look at growth, return on investment, and so forth. Unfortunately, by these measures, the market is over-priced. HOWEVER, if we value the stock market as a proxy for future income streams (*like you might value an apartment house, at least partly on its potential to gain based on inflation) then you might be able to make a case for higher prices even from these lofty levels.
For now, I'm just using this as a theory which in turn drives some of my trades. So this morning as I see the dollar being jammed up, it means that inflation might not be so bad. And when inflation is not bad, real estate prices don't go up - they come down - and that's just what's going to happen at the open this morning, if the futures mean anything. OK, bad for the unaware small-time stock picker, but it will show them Chinese guys how important the dollar is, right? Jam up the dollar and maybe China won't dump their dollar holdings and we can have one more tune for musical chairs as the paper Titanic sails through the gates of hell.
You might be wondering why I am feeling so detached. But, if you've been following my option trading adventures, things will resolve quickly. I told subscribers a while back that I had waded into a small pile of Walgreen 75 calls at $90/contract for the August expiration. And I reported yesterday that I had sold them all at $80/contract - meaning on 10-contracts there was a small but manageable $100 loss. Damn monkey mind/impatience! WAGHI's traded over $150 a contract yesterday! "Day early and a dollar shy," huh? I hate being right on a move and getting the timing wrong. But sh*t happens. Anyway, I'm comfortably short the S&P now and this weekend for subscribers to Peoplenomics, I'm updating my "Peak to Crash" tracking chart.
It's not a sure bet - let alone a sane one - to assume the market will be crashing between now and September and this is not financial advice. Merely confessions of an options player; do with it what you will.
I posted a homework assignment yesterday: ""Here's Global Econ 101 for you: If other countries are willing to pay higher rates, and the US doesn't keep up, why would the Chinese want to own our dollars? 250-word essays please?"
"They wouldn't. (Do I get extra credit for the 248 unused words?)"
Sure - Hell, I'll throw in a green star, too.
Brooklyn Blows Hard
Although our tracking of the word "shortage" shows we're at something of a lull from our recent climb, ,the occasional headline will reach out from the data. "U.S. sees cocaine shortage in Detroit, elsewhere." A successful war on drugs might be called a "good thing" by most, but I remember back in my beat reporter days that when heroin prices on the street in Seattle went up due to a big bust, so did the crime rate shortly thereafter. I wonder if the same will happen in the motor city, of if maybe Detroit's powdered sugar prices will go up?
Last Days of Musharraf?
The predictive linguistics boyz have been saying it for something like six-months - September will likely see regime change in Pakistan - at least language change indicates something along the lines of government change there. And again this morning the headlines seems to be catching up to their work: "Kabul peace conference opens with Musharraf". Quick - look surprised.
Musharraf may be entering the same waters as our US Congress: the power seems to be elsewhere and they're both becoming irrelevant quickly. Although the difference stops about there. Musharraf at least may declare a state of emergency and try to do something. Congress on the other hand seizing back its powers from the gang up the street? You gotta be kidding, right?
Speaking of the web bot project, a number of people have written in to ask if that 7.4/7.5 earthquake in Indonesia Wednesday was part of the Big Quakes. Sorry to say, but no. Not big enough. The really BIG series, which I expect will be at least 8.4 or into the 9's, isn't due until after the fall equinox and might be as late as Decemberish, so don't get impatient for them to show up. You're acting like an options player I know.
The 4.5 earthquake in the Chatsworth area was interesting, though. Cliff and Igor have been staring at the globe lately, pondering the odds of all this motion involving the site in Utah where the miners are trapped, the Minneapolis bridge collapse, and this morning's Chatsworth quake. Might is somehow related to a tectonic plate further south that is reportedly going the wrong direction.
The linguistic arrival which was headlined "fungus amongus" seems to be showing up right on schedule. The one I'm really watching for is what reads like a small victory in the war on terror, albeit accidentally. More when events catch up to us.
The latest democorp debates have been hardly worth watching - at least that's what the teevee viewership polls seem to imply. Quick - another surprised look, please.
Newt Gingrich says the road to the White House 'verges on insane'. Lookie here Newt, that ship done sailed... I don't think I'm the only one who has figured out that we're living in a corporate monoculture where the main difference between the democorps and the republicorps is which pocket they get paid from.
Two Bit Murder
A panhandler shot for asking for 25-cents? My, what a warm, loving, sharing, caring, nurturing planet we're on, eh?
Scientists are reported looking for ways to spot potential terrorists by looking at their body movements and watching their eyes in crowds to see who should be questioned by "authorities". Sounds like the ramped up, high tech version of phrenology, to me.
The NY Times headlines: "Minorities now form Majority in one-third of most-populous Counties". Does that mean I'm a protected class yet?
My commodity broker friend JB called this morning. He's wondering why NASA would launch the space shuttle just when the Perseids meteor shower shows up. If JB figures out what goes on in the minds at NASA I'm going to promote him to figuring out women next.
Wednesday August 8, 2007
The Secret Wars
The Federal Reserve move yesterday to hold interest rates where they were, along with the continued discussion of the threat of inflation, should be quite revealing for the thoughtful investor when coupled by the two types of "war" articles that are appearing in major media worldwide.
The first kind of "war" to be considered is the rumor we picked up out of Asia some weeks back that China was putting teams in place to begin serious sales of US dollar denominated instruments. Now, the UK's Telegraph is headlining that "China threatens 'nuclear option' of dollar sales". This discussion of how to pressure the US if Hank Paulson and the boyz on Wall Street don't give up their campaign to revalue the Yuan. China has enough US paper to bury us, so while the near-death-experience of the US dollar may not be making headlines in US LameStreamMedia, there's this horrible reality of a back alley fight going on right now. The gangs are quietly texting one another in public,so stay focused on the dollar/Yuan relationship.
The second kind of war to keep an eye on is the more or less conventional kind and we note with overtones of getting ready for resource wars. In particular, the Russian-Chinese alliance is conducting major war games. Of course, there's also that flap between Georgia and Russia over a supposed missile incident a few days back, but that's now being covered as a "jet ditched missile after mix-up." Can't speak for Russian pilots, but I expect the USAF's finest don't mix up quite this easily. Or, does this smell like you know what covering?
I exited my Walgreens calls on Tuesday (WAGHI) with a small loss ($100). There was a short time just before the Fed announcement when there was a slight profit to be had, but I waited to see what the Fed would do - and it cost me a few bucks. But, out of that, I'll likely re-enter the short side of things with some puts on maybe index options. I expect the stock market will resume its slide next week as the on balance volume on a one month chart looks peaky to me - and if we don't pop over 1521 on the S&P soon, then the rally back to 14,000 plus looks questionable. THIS IS NOT TRADING ADVISE. SEEK PROFESSIONAL COUNSEL BEFORE SPENDING YOUR HARD-EARNED MONEY.
We might see a bit of a bounce at the open today based on higher mortgage applications. Is that 'good news'? Maybe it's just people applying at multiple institutions so they can get a decent rate?
Even though the US Fed has held rates steady, the Bank of England is seen as likely raising rates to 6%. On top of this, the Reserve Bank of Australia has raised rates to 6.5%.
Here's Global Econ 101 for you: If other countries are willing to pay higher rates, and the US doesn't keep up, why would the Chinese want to own our dollars? 250-word essays please?
Circuses and Democorps
I don't mean to sound too skeptical of the democorps, but from what I read about last night's debate, I don't see any reason to change my bet on an Edwards-Clinton or Edward-Obama ticket, such being the powers that be's interests.
The rains have gone from our part of Texas - for now. And in its place have come warnings about the heat in the Central US and Indiana in particular. Dandy. 97 under the southern pines here for a brief while Tuesday.
Coal Mine Efforts
Tuesday August 7, 20076
From the Fed:
Maybe not all eyes will be on the Fed meeting today, but I can tell you two that will be - mine. I will post the Fed statement as soon as it's available. Lots of things to weigh on the decision, although I'm still expecting it to be a 'non-decision' in that I don't see many options for the Fed except to hold rates where they are.
The latest fund to stop investors from taking their money out is Frankfurt Trust out of Europe, which reports 20% of investors have pulled out in the past few days. The folks who run the mortgage lending "Implode-o-meter" are now reporting that 110 mortgage companies have gone bust since late in 2006 when their counting began.
The developing concerns about the financial health prompted lending giant Countrywide to show off its assets as officials announced they have access to $46.2 billion in cash and credit.
The market rally yesterday got me back to almost breakeven on my Walgreen calls - a little more rally (another point or so) and they might get profitable. That would be something working out according to plan - 'mazing, huh?
If this is a 'soft landing' one might well ask "What would a hard one be like?" As USA Today notes, "Inflation may not be the biggest risk".
We've been eyeing the falling prices of certain drugs (generics) and wondering "You don't think this is a symptom of deflation, do you?" Regardless, as the Wal-Mart inspired price cutting continues in the pharmaceutical world, Publix is planning to give away up to 14-day supplies of seven of the most common oral antibiotics. Prescription required, of course - they don't just hand them out half way down aisle seven. Pretty amazing marketing battle, though.
Don't be raising your hand asking "Hey! Doesn't the easy use of antibiotics just spur the bugs to become super-bugs and antibiotic resistant?" You mean like super-resistant to everything except the latest, greatest, and covered by patents owned by this company or that? Pah-leeeze, we don't get that cynical until later in the day. Chill.
Restrictions on Travel
Israeli intelligence is among the top three or four in the world - so when they issue a warning about travel to all their citizens in Muslim countries, I tend to sit up and take note. While kidnapping by Hezbollah is on the worry list, this seems like there's more to it.
George Bush says the US and Pakistan will be taking joint action to track down al Qaida...seems to me that nearly six years after 9/11 that this kind of 'announcement' wouldn't be worthy of a headline other than "Still don't have OBL'. But papers and the tube need something to spend ink and electrons on...
With any luck, those miners trapped in a Utah coal mine will be freed today. This happened at about the time of a couple of earthquakes in the area. No word on if the miners are dead or alive at this hour.
Did you happen to notice that both Dell and Lenovo has started selling Linux PC's? It's not like Microsoft doesn't have enough worries - they've had to cut their XBox 360 prices $50 officially. PS3's now sport 80 gb of memory.
I haven't played a video game on a dedicated box since gen one Nintendo with the kids which is an age confession... Why people spend so much money on games boggles me.
It's not all bad for Microsoft today - they won a reversal of a key MP3 patent case.
I can almost hear the phone ringing now - It'd be my deflationist pal Jas Jain calling to point out something like "Price CUTS? You mean like price deflation is showing up for consumers? Like Peak Debt is passing us by and there's no money left to spend kind of price cuts?" I may not answer the phone today.
Not that he'd be wrong - I see Toshiba has just released three new HD-DVD players under $500. Price matters, huh?
How fat are cats getting? Very, it seems.
Univision plans to do the first-ever presidential debate in Spanish. Let me know when there's a German or Gaelic version?
Not big enough to run a consumer product yet, but some basic science is getting down to how to make levitation really work at the just bigger than molecular level. We still have a very long way to go...or do we?
If you're ever near Miami, you might want to put a visit to the Coral Castle on your list. A little fellow named Edward Leedskalnin was able to build an incredible home/compound with megalithic kinds of cut stone - causing people to wonder if he hadn't figured out the secret nature of gravity allowing him to delicately balance 9-ton stones for doors in massive stone walls he built and such. Remember when you see the pictures or visit that the whole place was built by a fellow just over 5-feet tall and weight 100 pounds.
We've walked around the place (several times) looking at what he was working with - old car radio parts, baling wire and some evidence he was tinkering with electromagnets. No micro lenses and nano stuff for him. Very interesting place.
Monday August 6, 2007
Rally or Doom Week
Normally, I wouldn't ask you to open your eyes to something as challenging as a chart at this hour, or with this little coffee going, but these are unusual times that demand (at least occasionally) some thinking. So we begin this morning's report with what we call around here the Aggregate Index chart. This is the chart none of the professionals would dare generate because it points out that as much as we don't want to remember it, there really was a tech bubble and between its peak in 2000 and the lows of late 2002 (spilling into early 2003) there were several trillion dollars of net worth of investors wiped out.
All this chart does is say, in effect, "If you had purchased equal dollar amounts of the S&P 500, the Dow, and the NASDAQ Composite (IXIC) in 1998, this is about how your returns would have looked ever since....
The point that I would draw your specific focus to is the light blue (semi-transparent) line on the right side of the chart which shows that as of our last weekly readings (this weekend), the "support line" was pretty much smack where we are this morning.
If you're not used to my charting habits, you'll see the line move under the trend line to the right. That's because as a matter of personal practice, I put a "trail" on the data that will simply replicate the most recent reading. I do this for two reasons: First, it takes the data out to the right vertical (Y) axis so you can get a sense of the numbers without being thrown off by chart direction. The other thing it does is allows a person to look at how much more time along the horizontal (x) axis we would have to go before the trend is broken by time, whether up or down.
What the chart seems to be telling me is that we are in a "do or die" position with regard to the markets. If the markets don't do a huge rally from this support level, two very bad things happen: First, my Walgreen 45 calls drop to zero value come options expiration day, a week from this Friday. And marginally more important, the whole financial world ends. This latter I'm relatively well-prepared for, but most humans aren't so I'm hoping it doesn't happen.
Key will be tomorrow's Fed meeting. The folks in the fixed income markets are not having a good time at all, but my personal view is that the Fed's best course of action is to hold the course. Sorry if a few over-extended hedge funds blow up - but speculators have to come to terms with their proper label and not expect the rest of the investment universe to bail them out. The very definition of high returns and big leverage includes the word "risk" - and the bigger the risk, the bigger the potential losses. Just don't ask me (or anyone else) to underwrite them.
The financier types think that opening the Fed's discount window would be the answer. If you were around here this weekend, you might have caught the Jim Cramer appeal for just that, delivered on national TV Friday.
My personal take is that opening the discount window would not be the right thing to do, but what would be "right" would be for the government to have a plan in its back pocket to prevent people holding sub prime and Alt-A loans, to be granted some reasonable way to convert them into a fixed interest loan at a fair rate. I don't want the fat-cats bailed, I want the homeowners saved. If a few more pieces of fat cat's property hit the market on Long Island, then welcome to the world of falling home values - like the rest of us in non-financial America.
The real point that former Fed Chairman Alan Greenspan hyped the low "tease rates" / "first time homeowner" rates and then increased interest rates more than a dozen times does smell of financial entrapment, but remember, he worked for the Central Bank which is in turn owned by the Fed member banks and the mantra there is "economic stability". Missing is any pretext of "sound currency" because if the Fed was genuinely interested in preserving the value of money, we would not be sitting here with just 4.6 ¢ of purchasing power left in what would once - in 1913 when the Fed came along - have purchased a whole dollar worth of goods and services. Today it takes more than $20 to buy what $1 would buy when the bankers took over in 1913. But,. we don't here that mantra. Instead, we get "economic stability" drilled into our thinking. Right up there with "core rate" as part of the grand illusion.
To sum it up: We need to rally like hell this week, or the hot periods in the predictive linguistics (Aug 13-16 and Sep 3 - 18) could be 'walking of a cliff' for the market indices, not to mention the further decline in the purchasing power of the US dollar. Now, they might turn out that way regardless, but a good rally this week would least let the commercials load up on shorts from a higher level.
So rally anyone?
George Bush has continued to concentrate more and more power without recourse to the Executive Branch and the 'alphabet agencies'. The most recent is the no warrant needed clauses contained in the latest cave-in by Congress.
If you were waiting for the other half of the corpgov party, the democorps to come running out and defend the Constitution, think again. Nancy Pelosi is promising to "amend" this latest grab, but the odds of that are about like an ice cube in hell because if she really does anything that corpgov doesn't want, democorp pet projects will be toast. I call this "checkbook diplomacy."
I've been reading all kinds of reports like "Iowa Republicans see Romney as Straw Poll Winner" which come in the wake of this weekend's republican debatedebate. The national press (LameStreamMedia we call the group) doesn't publicize the ABCNews poll which showed Ron Paul was ahead of Mitt Romney by something like an 8 to 1 margin. In fact, almost all of the accounts I've read cite "projected" this and that and then blithely parrot the who has the blessing of corpgov as a 'safe" candidate who won't rock the boat. Lately that "rocking the boat" includes standing up for the Constitution, and I note Ron Paul is the only one in the debate who says we went into Iraq illegally and we should just get out.
This is the 62nd anniversary of the Hiroshima bombing in WW II. Speaking of which...
Cold War II
After a successful test firing, Russia is about to ramp up production of their new Bulava-M missiles. "But wait - don't you mean the new Topol missiles?" Nope, this is another type. Bulava M is for subs being only about 37' in length while the 74' long Topol is a ground-launched missile.
(See story above this week)
Write when you get rich,
George Ure, The People's Economist
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